May 31, 2014 12:10 am JST

Ito En pretax profit seen edging up 3% in fiscal 2013

This fiscal year marks the 30th anniversary of Ito En's green-tea drinks.

TOKYO -- Leading tea drink maker Ito En Ltd. is expected to post a pretax profit of just under 21 billion yen ($204.5 million) in the year ended April 30, a gain of slightly more than 3%.

     While the sum would mark the fifth consecutive year of profit growth, it falls just short of the 21.5 billion yen forecast made early in fiscal 2013.

     Higher sales of the company's Japanese-tea beverages contributed to the profit growth, as did increased revenue from subsidiaries, including coffee shop operator Tully's Coffee Japan Ltd. But marketing costs, including discounts, apparently rose more than expected, amid fierce competition for market share.

     Sales are seen climbing around 8% to roughly 435 billion yen, undershooting the initial forecast of 440 billion yen. Sales of Japanese-tea beverages exceeded targets, thanks to robust demand for such offerings as a new line of the mainstay Oi Ocha green-tea drinks and barley teas. Ito En also saw sales rise for its Tully's canned coffees.

     Black-tea drinks, however, faired poorly. The company was also apparently hurt by a recoil in demand last month after the consumption tax hike kicked in April 1.

     In addition to a boost from opening new locations, same-store sales for Tully's shops rose, bolstered by expanded menus, among other factors. Subsidiary Chichiyasu Co., a dairy manufacturer, apparently returned to the black on an operating basis after posting a loss the prior fiscal year.

     Ito En's green-tea products face fierce competition from such rivals as Suntory Beverage & Food Ltd., which are stepping up their game. Adding to the strain, supermarkets and convenience stores are filling shelves with their own proprietary-brand products. This prompted Ito En to step up promotional spending, including on bargain campaigns. The company also apparently saw logistics costs rise amid labor shortages.

     This fiscal year, Ito En will ramp up efforts to sell Oi Ocha drinks in conjunction with the 30th anniversary of its green-tea beverages. Sales are expected to climb 4-5% to just over 445 billion yen. Endeavoring to keep promotional expenses down, the company will target a pretax profit of around 22 billion yen.